As promised, Part II of “Buying and Selling at Auction—A Primer”

You can read Part I here.

I started the first part of this series discussing how new collectors may confidently select auction houses and the importance and benefits in previewing the material to be bid upon. Now let’s take a look at the most exciting (and treacherous) part of an auction: bidding for, and hopefully winning the material you’re chasing after!

Let’s start with what you should pay for that autograph you so desperately want for your collection. Do you already know what you should bid for it? Haven’t a clue? For starters, scan dealers’ printed and on-line catalogs and auction results to get a feel for the sale prices for items similar to what you seek. One good source for auction prices is American Book Prices Current, an on-line database, artfact.com, and icollector.com.

Remember, though, that “content” is everything. A 1960 letter from Harry Truman thanking someone for sending smoked oysters is worth $100, but when we sold a Truman letter explaining his reasons for dropping the atomic bomb on Japan, it brought over $23,000! Condition is also important—faults in an item such as repairs, tracing, and lamination may drastically affect its value.

Cast a very wide net, and use a lot of sources. Some dealers have extremely high prices, but are content to sell just a few items per month to get by, while others prices items at very low levels and depend on high sales volume to make their money. And remember that not everything a dealer lists sells.

Auction results should also be viewed with a jaundiced eye. Items that fail to meet a "reserve price" (a minimum selling price set by the consignor) may be shown as being “sold” in auction result. Often, no distinction is made between items really sold to real buyers and those that have been "passed" because of a reserve, so those checking auction results tend to believe that a rare letter by, say, Stephen Crane was really sold at $12,000 when actually it "passed" and was never sold at all. Particularly egregious is the practice of an auctioneer advertising the “sale” of an item that never really sold at all.

At Alexander Autographs, we show all unsold lots as truly unsold, with the resulting sale price as "$0.00". Beware of any auction house that shows a 100% sale rate—that's virtually impossible unless EVERY lot is unreserved, and in the autograph world that NEVER happens. You can bet that some of the prices you see for items listed as "sold" are really for items that "passed".

Why do they do this? No auctioneer wants their sale to look like a flop. A 93% sale rate is very impressive, and if a shady auctioneer has achieved that rate of sales showing "passed" lots as "sold", he looks like a hero. If in reality he only sold 50% of the lots consigned, he looks like a goat. So, the temptation is great to "fudge" the results. In this difficult market, we'll take our lumps: at Alexander, if a lot is "bought in" or "passed", we show it as unsold.

Now on to estimates and "minimum bids"...

An "estimate" is a price range within which an auction house expects the lot to sell, for example: "Franklin Roosevelt signature, fine condition....$150-200". This is the way we at Alexander Autographs estimate our material, as we feel it gives the potential bidder an accurate idea as to where the lot will finally sell (although some lots may sell at much higher or lower levels than the estimate). Be careful though—estimates can misleading! Some auctions set very low estimates to lure in buyers, others set very high estimates hoping that someone will put a bid in at even a fraction of the low estimate, thinking they'll get a great bargain, and end up winning an item that's really been sold at market level. In any event, only the most unethical of auctions will have a low estimate above a reserve price (unless the auctioneer is willing to cut his commission to sell an item).

Within the last few years, the concept of the "minimum bid" came into play...and a very clever idea it is! Originally, the minimum bid was meant to discourage cheapskates from entering frivolous bids. Sometimes, the minimum bid reflected the level of a reserve on an item, indicating that it was the minimum actual price at which any bidder could hope to win the lot. That concept has been, for lack of a better word, corrupted over the past few years. Recently, we see auctions offering $10,000+ documents with a "minimum bid" of, say, $500. This trend might be repeated throughout an entire catalog. You can bet that there is virtually no chance that even if you were the only bidder in the sale, you'd never win the document for $500, as there simply is no way that every document in the sale is likewise unreserved—no consignor would ever be so foolish! We believe this is simply a clever marketing tool used as a "come-on" to elicit bids and should be recognized as such.

That being said, go into an auction thinking that every lot might bear a reserve, and knowing that the auctioneer has no obligation to disclose that reserve. When you bid, you may be bidding against a real bid made by a real person, or you may be bidding against a consignor's minimum acceptable price...you'll never know. But that won't matter because if you've done your homework, you'll already know what you're prepared to pay for that piece you want.

So how should you bid? What technique should you use? Well, I personally like live auctions for both the thrill and for peace of mind. If you can attend in person, sit either in the front or back of the room and be discreet. Once you bid, the auctioneer will always look back at you for another bid. A nod of your head will be enough for him to know that you want to go up another increment.

There are some tricks as well. Wait for all the initial bidding to slow to crawl, maybe even stop, then jump in with your bid. That tactic unnerves your competition and may cause them to drop out pretty quickly. Another tactic I like is the "atom bomb": if you're ready to pay, say, $5,000 for a lot, and it opens at $500, call out "$1,000". A large jump in bidding scares the heck out of your competition, may make them think you're nuts, and might scare them off the lot more effectively and sooner than if you bid them up $50 at a time.

Some people think they can unnerve the competition by raising their bidder's paddle once their lot comes up and never putting it down until they win the lot. This might work for Bill Gates, but for others among us it can prove to be financial suicide: a dishonest auctioneer who sees such determination can watch such a bidder, and then take bids against him from a chandelier, a statue in the corner, his grandmother in the back of the room, etc. etc. until Mr. Paddle Man begins to waver, and then auctioneer will hammer down the lot to the determined buyer—at ten increments above what he should have paid. How do I know? It happened to me at a prestigious auction in New York when the auctioneer took a bid from behind me...where there was nothing but a wall!

If you can't personally attend a sale, try to get a telephone line for live bidding or bid on-line (although you may pay a couple of percentage points premium for that service). You can even hire an agent to preview a sale and/or bid for you in a live sale, but that also will cost you a few bucks. Finally, you can always leave absentee (or "maximum") bids with the auction house. A reputable house will bid up to your maximum bid against competitors' bids as need be. However, if over several sales you see that your multiple huge maximum bids are always exactly the same as the selling price you're charged, you should start asking questions...

Internet-only auctions are another animal altogether. As a rule, they allow no bidding in their offices, and unless you constantly check your computer, you could be outbid at any time. All lots generally close at the same time, unless there is some type of "time" rule keeping a particular lot open until bidding activity on that lot ceases for a specific number of minutes. This type of system has its advantages and disadvantages. These auctions can sometimes last for many hours beyond their posted closing time, giving those in western time zones a distinct advantage over those in Europe, as they can stay awake long enough to bid and counter-bid upon the items they desire. The "time" rule does help collectors in some manner, allowing them to bid on other lots in the sale once they've been outbid on their preferred items—the sale does not close sequentially, lot-by-lot.

If you're going to bid live and on-line, see if the auction house has their own real-time on-line bidding system versus a host such as icollector.com or artfact.com. Although the latter two firms provide excellent service, it's not free and auction houses often pass that cost on to their customers in the form of an addition to the buyer's premium. Read terms carefully!

Finally, there's the matter of eBay. I won't warn any of you about the pitfalls of buying in eBay auctions—it's all on this website already. I can say that I've also found some terrific buys there! I firmly believe that, sneaky as it is, "sniping" is the best way to bid, and there are plenty of programs out there to help you ruin your competitors' day. Why snipe? If you bid early, you'll attract attention to the lot as a potential "bargain", and there goes your advantage. Simple as that. Bid as much as you're prepared to pay, and don't go overboard.

A final note about a disease inherent in our trade...auction fever! It's a common malady, more easily acquired in a live auction setting than at home while bidding on a computer. First discovered by eminent auctioneer and philographer Charles Hamilton. What am I talking about? The sudden determination to buy a lot and outbid the SOB bidding against you no matter what, to get that lot because you KNEW and BELIEVED you were going to win it, and now some BUM has gotten in your way and NO MATTER WHAT you are going to WIN IT! Don't succumb to this diseaseI've had people ask me if they should mortgage their house to buy a lot in my sales!

You'll always get another shot at it...